Loan Foreclosure & Settlement Calculator
Determine your exact outstanding balance, interest liability saved, and net cost benefit of early settlement under RBI Fair Practice codes.
Legal Rights Under RBI Master Directions
Under RBI circulars (DBOD.No.Dir.BC.107/13.03.00/2013-14 and subsequent digital lending mandates), banks and NBFCs are strictly prohibited from levying foreclosure penalties or prepayment charges on floating-rate term loans granted to individual borrowers (whether with or without co-obligants).
However, penalties of 2% to 4% plus GST are legally permissible on: (1) fixed-rate loans, (2) facilities sanctioned to corporate entities, partnerships, and sole proprietorships for business purposes, and (3) cash-credit or overdraft limits.
Frequently Asked Financial Questions
In a reducing-balance loan, interest is calculated solely on the outstanding principal balance at the end of each month. As you repay, the interest burden drops steadily. In contrast, flat-rate loans calculate interest on the full original principal throughout the entire tenure, effectively doubling the real interest rate.
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